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TRANING FOR SOMALI TELECOMMUNICATION MANAGERS; AFRALTI, 22 – 26 MARCH 2004 Restructuring Options Mergers, acquisition, PowerPoint Presentation
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TRANING FOR SOMALI TELECOMMUNICATION MANAGERS; AFRALTI, 22 – 26 MARCH 2004 Restructuring Options Mergers, acquisition, - PowerPoint PPT Presentation


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AFRALTI/ITU-BDT WORKSHOP. TRANING FOR SOMALI TELECOMMUNICATION MANAGERS; AFRALTI, 22 – 26 MARCH 2004 Restructuring Options Mergers, acquisition, Jv etc. Current set up. From information – Somalia has 9 telecommunication companies each with its own gateway

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AFRALTI/ITU-BDT WORKSHOP

TRANING FOR SOMALI TELECOMMUNICATION MANAGERS; AFRALTI, 22 – 26 MARCH 2004

Restructuring Options

Mergers, acquisition, Jv etc.

AFRALTI/ITU-BDT/HRD Restructuring Options

current set up
Current set up
  • From information – Somalia has 9 telecommunication companies each with its own gateway
  • This approach works well on the basis of the current political situation in the country.
  • May not be cost effective and efficient after the various factions reach political truce.

AFRALTI/ITU-BDT/HRD Restructuring Options

looking ahead
Looking ahead
  • Important to start looking forward on the best direction for telecommunications sector
    • Retain status quo;
    • Restructure current;
    • Start up new entities;

AFRALTI/ITU-BDT/HRD Restructuring Options

internal restructuring
Internal Restructuring
  • The repositioning or reconfiguring of an organization from within the organization:
    • Normally done by existing management.
    • Ownership does not change.
    • Directed by shareholders or their agent e.g. Board
    • Mainly focus on improving performance of the organisation.
    • May result in charging labour strategies-outsourcing (revenue collection, Motor vehicle maintenance.

AFRALTI/ITU-BDT/HRD Restructuring Options

global trend
Global trend
  • The global trend is the privatization of the sector with a strong independent regulatory body.

AFRALTI/ITU-BDT/HRD Restructuring Options

change in the political situation
Change in the political situation
  • Somalia already has private operators in place but maybe with limited geographical coverage. What happens after the political truce is in place?

AFRALTI/ITU-BDT/HRD Restructuring Options

options for the way forward
Options for the way forward
  • Allow each company to retain status quo and undertake expansion programs?
  • Some companies merging together?
  • Some companies acquiring others?
  • Any joint ventures to invest in the back bone or establish new companies?

AFRALTI/ITU-BDT/HRD Restructuring Options

the way forward
The way forward
  • Develop alliances among existing companies?
  • Strategic investors in telecoms?
  • Employee shareholding schemes?
  • Government establishing a national company?

AFRALTI/ITU-BDT/HRD Restructuring Options

internal restructuring9
Internal Restructuring
    • Could result in divesture of some units (WS, security etc.)
    • Re-engineering of systems and processes for improved productivity or efficiency.
    • Re-organization on the basis of services/products - fixed and mobile networks.
  • Purpose of Internal restructuring
  • add value and attractiveness of the organisation.
  • To gain market share
  • Improve the image
  • To address commercial issues, profitability and new vision of company

AFRALTI/ITU-BDT/HRD Restructuring Options

internal restructuring10
Internal Restructuring
  • Suitable if the management is ready for the following:
    • Acknowledge the changing environment in the country
    • Admit the challenges of network expansion and improving performance country wide.
    • Believe that they are able and commit themselves to dealing with both internal and external challenges .

AFRALTI/ITU-BDT/HRD Restructuring Options

internal restructuring11
Internal Restructuring
  • Decide the role of each in brining up the desired change.
  • Conduct a proper assessment of the organizational performance in order to unearth all factors affecting performance within and without their control.
  • Decide what changes should be done.
  • Make the necessary changes happen by taking appropriate actions in the workplace.

AFRALTI/ITU-BDT/HRD Restructuring Options

management contract
Management Contract
  • The bringing of external management with the expertise and experience in turning around poor performing organizations:
    • Ownership does not change.
    • Top management outsourced.
    • Contract for a specific period.
    • Management free paid by owner.
    • KPI and targets agreed with shareholders.

AFRALTI/ITU-BDT/HRD Restructuring Options

management contract13
Management Contract
  • This option aims at fast turn-around of the organization.
  • It can be part of an agreement after privatization/acquisition.
  • Restructuring can include all areas specified under internal restructuring.
    • This is a top down approach.
    • Internal politics a challenge (management viewed as forceful, arrogant, confrontational)
    • Needs proper selling and communication.
    • Can fail if not properly handled.

AFRALTI/ITU-BDT/HRD Restructuring Options

when to continue independently
WHEN TO CONTINUE INDEPENDENTLY

Disadvantages:

  • Too many players for a small market.
  • High investment costs for each.
  • Unique regulatory problems.
  • Lack of capital to expand network.
  • Collapse of some companies

AFRALTI/ITU-BDT/HRD Restructuring Options

when to continue independently cont d
WHEN TO CONTINUE INDEPENDENTLY(Cont’d..)
  • Fraudulent activities among players.
  • Complicated interconnection Agreements.

Advantages

  • Good customer service as result of high competition.
  • No complications on ownership.

AFRALTI/ITU-BDT/HRD Restructuring Options

when a political truce is realized the following could happen
When a political truce is realized the following could happen;
  • Survival of the fittest could occur.
  • Possible competition among companies
  • Collapse of some companies.
  • Weak being bought by the mighty.
  • External funding increased.
  • Normally leads to selling/buying fully or partially of companies.

AFRALTI/ITU-BDT/HRD Restructuring Options

partial acquisition
Partial Acquisition
  • Partial take over of ownership and control of one company by another:
    • Additional participation in ownership
    • Previous owners retain part of ownership.
    • Management control can be retained or changed.
    • Normally share capital paid in cash.
  • In telecom, normally between 30% - 51%. Count includes employee share ownership schemes, some shares.

AFRALTI/ITU-BDT/HRD Restructuring Options

full acquisition
Full Acquisition
  • Ownership changes hands.
    • Previous owner completely goes to new owner
    • Normally paid in cash.
    • Takes place when owners decide to separate or exist for such business.
  • Advanced stage of privatizing a telecoms entity when Governments sells all shares.

AFRALTI/ITU-BDT/HRD Restructuring Options

reasons for acquisition
Reasons for Acquisition
  • Poor financial performance of the company
  • Failure to compete with other companies or new entrants
  • Some shareholders decision to move out of the business

AFRALTI/ITU-BDT/HRD Restructuring Options

mergers
Mergers
  • This refers to one company taking over another or the coming together of two companies of nearly equal sizes.
    • The pre-merger owners have shares in the merged organizations.
    • Management positions shared by pre-merger managements.
    • Normally only share swaps rather than cash.

AFRALTI/ITU-BDT/HRD Restructuring Options

reasons for mergers
Reasons for Mergers
  • In the event National Telecommunications, one operated as separate entity from External Services.
  • Two small operators merge with a view to compete effectively with another in terms of coverage and services.

AFRALTI/ITU-BDT/HRD Restructuring Options

reasons for mergers22
Reasons for mergers
  • Opportunity for cost cutting (have single management - operational costs).
  • Sharing of investment costs e.g. backbone network or gateway.
  • Sharing of operational costs through utilization of facilities.
  • Increase a market penetration of the telecoms services

AFRALTI/ITU-BDT/HRD Restructuring Options

demergers
Demergers
  • This involves the break up one organizations into two or more separate entities.
    • Ownership can remain the same.
    • No cash exchanges hands.
    • Assets normally shared among the entities
    • Staff allocated according to type of business.
    • Corporate staff shared in agreed proportions.

AFRALTI/ITU-BDT/HRD Restructuring Options

demergers24
Demergers
  • When two competing business operate under one organization e.g. Postal and Telecommunication Services (fixed and mobile).
  • Conflict of interests e.g. incumbent operator also being responsible for Regulatory framework.
  • One business not as profitable as the other (postal & telecoms); (fixed & mobile telecoms services).

AFRALTI/ITU-BDT/HRD Restructuring Options

divestiture
Divestiture
  • When a company decides to do away with a specific or part of the business for commercial or strategic reason.
  • Doing away with non-core business e.g. security, revenue collection, workshop, printing, in a telecommunications environment.

AFRALTI/ITU-BDT/HRD Restructuring Options

reasons for divestiture
Reasons for Divestiture
  • Not meeting the projected growth, profit margin or return on capital.
  • Loss making.
  • A particular business becoming no longer profitable due to technological developments or acquisition of new technology

AFRALTI/ITU-BDT/HRD Restructuring Options

joint ventures
Joint Ventures
  • Joint venture is a business partnership in which two or more companies agree to invest in a particular business. The companies can retain their identity or form a separate entity.

AFRALTI/ITU-BDT/HRD Restructuring Options

joint ventures28
Joint Ventures
  • Mozambique Telecoms (TDM) have a number of joint venture companies with foreign companies.
  • Telkom Kenya has a number of joint ventures.
  • Vodacom South Africa is a joint venture between SA Telecoms and two other investors.
  • MSI and Detecon formed a consortium to buy shares in TTCL-one with money and the other with expertise?

AFRALTI/ITU-BDT/HRD Restructuring Options

reasons for joint ventures
Reasons for joint ventures
  • To spread risk.
  • Mainly for creating a strategic alliance.
  • To raise funds for the acquisition.

AFRALTI/ITU-BDT/HRD Restructuring Options